UnThreaded | Threaded | Whole Thread (15) | Ignore Thread Prev | Next
Author: Michaelzehr Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 311078  
Subject: Re: Lower minimum payment Date: 6/19/2002 1:28 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Greetings, Mark0Young, because of compounding I would think that it may be better to pay at least the monthly interest charge as a minimum payment on any of the outstanding debts a person has. Otherwise, even as the snowball dollars are rolling over a higher interest debt, the debts waiting their turn won't get any bigger than they have to due to interest owed on interest.

If a LOW interest rate card has a minimum set below the monthly interest and you have a card with a HIGHER interest rate, then paying just the minimum on the first card and applying the rest to the higher interest rate card is like getting a no-cost balance transfer from the higher interest rate to the lower.

While it's true that the extra $ on the lower rate card will compound interest, the $ on the higher rate card that you didn't pay off will compound interest even faster.

What matters is the total debt and the average interest rate[*], not whether each individual balance is going up or down.


[*] as already pointed out by someone else you have to keep under the credit limit on the lower rate.

Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (15) | Ignore Thread Prev | Next


TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.